Federal Reserve Advocates for Stablecoin Regulation Amid Growing Usage

Federal Reserve Chair Jerome Powell has emphasized the necessity of establishing a regulatory framework for stablecoins, highlighting the growing importance of these digital instruments. Speaking at The Economic Club of Chicago, Powell noted that both chambers of Congress are revisiting efforts to legislate a stablecoin framework, which he described as essential given the increasing relevance of stablecoins in the financial landscape.

Powell acknowledged that previous attempts to collaborate with Congress on a legal structure for stablecoins were unsuccessful. However, he observed a shifting climate, with lawmakers now showing renewed interest in formalizing regulation. He stressed that such a framework should include consumer protections and ensure transparency, noting that stablecoins have the potential for wide appeal as a digital product.

In addition to advocating for stablecoin regulation, Powell addressed the Federal Reserve’s stance on crypto-related banking activity. He acknowledged that US bank regulators, including the Fed, had taken a conservative approach in issuing guidance on how banks should manage exposure to digital assets. However, he indicated that some of this guidance may be relaxed to accommodate responsible innovation, provided consumer protections and financial safety remain intact.

Powell’s remarks build on his previous statements that the Fed is not seeking to prevent banks from serving lawful crypto clients. In testimony to Congress earlier this year, he clarified that crypto activities are already occurring within Fed-regulated banks under established supervisory frameworks. He cited crypto custody as an example of such services that banks can conduct safely if they and the regulators understand the activities’ scope.

Powell also acknowledged the regulatory complexity surrounding digital asset integration into traditional finance, calling for a more comprehensive oversight structure. During a press conference following the Federal Open Market Committee (FOMC) meeting in February, Powell stated that while the bar remains high for banks to engage with crypto, the Fed does not intend to cut off access to banking for legally operating digital asset firms.

The ongoing discussion around stablecoin legislation comes amid continued growth in their usage for payments and digital settlement. Powell’s statement positions the Federal Reserve as supportive of congressional efforts to create formal rules for stablecoins, provided such legislation balances innovation with risk containment. There is currently no federal regulatory regime specifically governing stablecoins, though multiple legislative proposals have circulated in recent congressional sessions.

The Fed’s latest position indicates growing readiness among US financial authorities to engage with digital asset policy, especially as stablecoins increasingly integrate into global financial markets. Powell’s advocacy for stablecoin regulation and openness to crypto innovation signals a more proactive approach from the Federal Reserve in addressing the evolving landscape of digital assets.